SUMMARY Alveolar injury and ineffective repair have been hypothesized to underlie the pathogenesis of chronic obstructive pulmonary disease and pulmonary fibrosis. While genome-wide association studies and clinical specimens have suggested a role for chronic stress, inflammation and DNA damage signaling, the underlying mechanisms and the cell states in which the above pathways are dysregulated during alveolar regeneration remain elusive. In our recent studies, using organoids, single cell transcriptomics and in vivo lung injury models, we uncovered a previously uncharacterized, transient, pre-AEC1 transitional cell state (PATS), traversing between AEC2 and AEC1 in alveolar regeneration. Interestingly, pathway analysis for genes expressed in PATS showed a significant enrichment for targets of transcription factors TP53 and SOX4, and DNA damage repair pathway. We also found that this cell state is vulnerable to stretch mediated DNA damage during differentiation of cuboidal AEC2 into extremely flat and thin AEC1. Conditional ablation of Tp53 and Sox4 in AEC2s revealed a dramatic decrease in the number of AEC1, and a significant increase in the number of PATS. These data suggest an essential role for transcription factors TP53 and SOX4 in regulating AEC2 to AEC1 differentiation via pre-AEC1 transitional state and the DNA damage repair during alveolar regeneration. Based on our preliminary data, we hypothesize that the AEC2 progenitors go through a novel and molecularly distinct pre-AEC1 transitional state to differentiate into AEC1. We also hypothesize that TP53 and SOX4 -mediated mechanisms are essential for the cell cycle arrest, cell adhesion, cell stretching, and DNA damage repair pathway during differentiation of AEC2 to AEC1. The major objectives of this proposal are to molecularly and functionally characterize the newly identified pre- AEC1 transitional state and to study the mechanisms governing this cell state in alveolar regeneration. In Aim1, we will study the molecular identity, the temporal dynamics and the plasticity of a novel pre-AEC1 transitional state in alveolar regeneration. In Aim2, we will test the hypothesis that TP53 and SOX4 mediated mechanisms control cell cycle regulation, cell adhesion, and DNA damage repair pathways in pre-AEC1 transitional state during AEC2 differentiation into AEC1. We will use organoid models, in vivo genetic and pharmacological loss- of-function models, and molecular assays to study these specific aims. This work has taken on added importance, as recent genome-wide association studies revealed mutations in the components of the DNA damage repair signaling as one of the major drivers for emphysema and pulmonary fibrosis. Therefore, our finding that stretch associated DNA damage in the pre-AEC1 transitional state makes it potentially vulnerable to lung diseases. Thus, the outcomes from the proposed studies will have broader significance and will lay the foundation for future studies involving human alveolar regeneration and diseases.